Earlier today, the FCC proposed another slight decrease in the quarterly USF contribution factor. The combination of the lowest demand projection in two years plus the lowest interstate revenue ever has resulted in a proposed 15.1% contribution factor for the third quarter of 2013. This represents a slight decline from the 15.5% factor for the second quarter 2013 which was a similarly slight decrease from the 16.1% contribution factor for first quarter 2013.

The decline in the third quarter 2013 contribution factor resulted from record low projected quarterly USF revenues of $16.1 billion which were offset by low anticipated USF demand of $2.09 billion.

The declines in USF demand may come to an end as the Commission considers reforms to the USF’s Schools and Libraries program (often referred to as the “E-Rate” program). As we pointed out in an earlier post, President Obama recently called for reforms to the E-Rate program to increase access to high speed connectivity in schools and libraries. If implemented, these reforms could lead to increased demand for USF support which, in turn, could increase the USF contribution factor. FCC Commissioner Rosenworcel stated yesterday that a proceeding to consider reforms to the E-Rate program would be started this fall.